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Drivers Not Entitled to Overtime When Route Is Part of Interstate Delivery

Commercial truck drivers who delivered beer to a warehouse and brought back empty kegs, pallets, hops and other items shipped interstate were not entitled to overtime, the 10th U.S. Circuit Court of Appeals ruled.

Decker Truck Line Inc. is a for-hire motor carrier regulated by the U.S. Department of Transportation (DOT) with its principal office in Fort Dodge, Iowa. Decker provided transportation services for New Belgium Brewing Co. to make two types of shipments: outbound shipments of beer from New Belgium’s brewery to its warehouse, and backhaul shipments of empty kegs, pallets, hops and other materials from the warehouse to the brewery. These two facilities are located approximately 5 miles apart in Fort Collins, Colo. Decker employed commercial truck drivers to transport these categories of shipments.

New Belgium sells primarily to distributors located outside Colorado. Because New Belgium lacks sufficient refrigerated storage at its brewery, Decker’s drivers transport approximately 99 percent of the beer New Belgium produces from the brewery to the warehouse. Upon arrival at the warehouse, approximately 10 percent of the beer is repackaged, but most of it is left undisturbed. Carriers retrieve the product from the warehouse at a designated date and time for delivery to distributors. On average, the beer remains at the warehouse for two weeks before it ships to New Belgium’s customers.

On occasion, some beer is never stored at the warehouse. Rather, it ships from the brewery to the warehouse, is scanned into the warehouse inventory and is loaded directly onto an outbound truck. Of the beer that the drivers transported to the warehouse in November 2013, about 86 percent was shipped to locations outside Colorado. That figure rose to 89 percent in February 2015.

Some of Decker’s drivers filed a federal lawsuit claiming that Decker failed to pay them proper overtime wages. The drivers sought overtime payments under both the Fair Labor Standards Act (FLSA) and the Colorado Wage Order. The district court granted summary judgment to Decker, dismissing the case before trial, because the drivers were performing part of an interstate delivery. Under the Motor Carrier Act, drivers of vehicles weighing 10,000 pounds or more who transport goods or people in interstate commerce are not covered by the FLSA but instead are covered by DOT regulations regarding maximum permitted work hours.

On appeal, the 10th Circuit considered whether the district court was correct in ruling that the drivers were not entitled to overtime because they drove an intrastate leg of shipments in interstate commerce. The drivers argued that the warehouse constituted a new delivery point for the beer, and thus their deliveries within Colorado were not part of an interstate journey.

The 10th Circuit disagreed, however, after considering the purpose of the Motor Carrier Act exemption to the FLSA and deciding that Decker was subject to DOT regulation.

In drawing this conclusion, the 10th Circuit considered the fixed and persisting intent of Decker in transporting the beer and beer-related items. The court also considered U.S. Supreme Court case law stating that the entry of goods into a warehouse may interrupt, but does not necessarily terminate, their interstate journey.

Of particular importance to the 10th Circuit was the fact that empty kegs, pallets, hops and other materials arrived at the warehouse primarily from out-of-state locations to be driven back to the brewery. The backhauling of this material—in particular, the hops—was indispensable to the processing procedures at New Belgium brewery. Therefore, it was undisputed that the drivers completed the final intrastate leg of the backhauled materials’ intended journey across state lines.

Professional Pointer: The FLSA is a remedial statute and is generally interpreted broadly to cover employees and require payment of overtime. Exceptions exist, however, for certain types of employers that transport goods or are involved in interstate transportation. Shippers should always check to see whether they are required to pay overtime compensation under the Motor Carrier Act exemption to the FLSA.